S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF MERRILL LYNCH (MER; 44.89):
MER posts first quarter loss of $2.20 from continuing operations, vs. $2.26 EPS, wider than our $1.24 loss estimate. Writedowns of various troubled assets classes were somewhat offset by downward liability adjustments, but elevated compensation and other costs led to the first quarter loss. We are concerned about failing hedges and resulting growing net exposure to some troubled asset classes. In our view, investment banking trends are still negative. We are cutting our 2008 EPS estimate by $1.85 to $0.61 and 2009's by $0.06 to $6.24. We are keeping our target price at 40, 1.5 times projected book value. -M. Albrecht
S&P REITERATES STRONG BUY OPINION ON SHARES OF EBAY (EBAY; 32.12):
Including stock-based compensation, but excluding the impact of acquisition-related amortization, EBAY posts first quarter EPS of $0.38, vs. $0.30, in line with our forecast. Net revenues rose 24%, above our 22% forecast, reflecting what we believe was strength across all main businesses. Reflecting a more uncertain global economic outlook, we are trimming our 2008 and 2009 revenue forecasts somewhat. Accordingly, we are lowering our EPS estimates for 2008 to $1.58 from $1.62 and 2009 to $1.93 from $2.06. Nonetheless, we continue to see EBAY as a compelling value at 20 times our 2008 estimate. -S. Kessler
S&P MAINTAINS BUY OPINION ON ADSS OF NOKIA (NOK; 33.69):
NOK posts first quarter adjusted EPS of 0.41 euros, vs. 0.26 euros, above our 0.36 euro estimate. Revenue growth was a bit lighter than we expected, as revenues were lower in the network segment, but mobile device revenues were stronger on higher device sales. Adjusted EBIT and EBIT margin were better than we expected. We note NOK's forecast that growth in the mobile device market will be slower in 2008 than in 2007, due to lower average selling prices, but we see this offset by NOK's market-share gains and strong emerging market position. We will update following conference call. -C. Van der Elst
S&P REITERATES STRONG BUY OPINION ON SHARES OF INTERNATIONAL BUSINESS MACHINES (IBM; 120.47):
IBM reports first quarter EPS of $1.65, vs. $1.21, beating our $1.45 estimate. Revenues rose 11% (4% in constant currency terms), led by strength in services segments and emerging market territories. Gross margins widened, tax burden eased, and share count decreased notably. We see favorable trends in bookings, new hardware products, and cost controls continuing over the next 12 months. We are increasing our EPS estimates to $8.75 from $8.25 for 2008, and to $10.00 from $9.30 for 2009. We are also raising our 12-month target price to 155 from 140 based on our revised p-e analysis. -T. Smith, CFA
S&P UPGRADES OPINION ON SHARES OF ALTERA TO HOLD FROM SELL (ALTR; 19.20):
First quarter EPS of $0.27, vs. $0.21, is $0.05 better than our estimate. Sales reflected strong sales of New Products and beat our model. Sales to the communications and industrial markets grew notably. Gross margin widened on mix. Adjusted operating margin expanded, reflecting slower first-half spending. Adjusted interest income fell on lower cash and higher debt. We now expect little impact from the macroeconomic environment over the near term, and are raising our 2008 EPS estimate by $0.08 to $1.04. We are also raising our 12-month target price by 4 to 22 on higher relative metrics. -C. Montevirgen
S&P DOWNGRADES OPINION ON SHARES OF WATTS WATER TECHNOLOGIES TO SELL FROM HOLD (WTS; 30.58):
We expect shares to open lower today, after WTS posts disappointing first quarter preliminary results. The company sees a decline in global organic sales and forecasts $0.35-$0.38 EPS, well below our $0.50 estimate. We now project lower sales for 2008 based on a soft U.S. housing market, slower commercial growth and a weaker European economy. We see further restructuring initiatives, in an effort to improve cost structure. We are cutting our 2008 EPS estimate by $0.20 to $2.15, and 2009's by $0.25 to $2.35. Blending relative and DCF-based metrics, we reduce our target price by 8 to 24. -S. Scharf